The airline industry in the United States is a significant portion of our critical infrastructure and it is on brink of implosion with little more than the occasional mention in the news. This week United and Continental airlines announced significant reductions in their fleets to try to staunch the financial hemorrhage. Lesser air carriers are fast approaching cessation of operations while six or seven carriers have already shutdown.
To put it in context, according to AW&ST June 2, 2008, the entire US airline industry earned a profit of $3.8B for 2007. The combined fuel bill alone for 2008 will be $18B. This will necessitate a quintupling of the profit level just to break even – a situation highly unlikely to occur.
As with other aspects of our economy, the increase in oil prices is having a serious impact. The airlines not only take us on holiday, but also provide the necessary vehicle for the global economy so critical to our Nation. The US military is incapable of moving the large numbers of people required in today’s complex world without the use of chartered airliners. The airlines are fairly compensated for these charters, but this is a small part of the total business strategy and the airline must stay in business if the military expects to be able to call for a ride.
It is time for Congress to take up the difficult question of what is causing oil prices to rise at a rate well outside anything tied to production or consumption. This is a National Security issue and deserves to be addressed with the same vigor we would direct against an attack, natural disaster, or pandemic outbreak.
The airline industry has long recognized the cost impact of fuel, “Between 1978 and 2007, U.S. airlines improved their fuel efficiency by 110%.” The Washington Times (6/5).
Of course there are have been some poor business practices and they will not be remedied by charging $15 to check a bag. This situation needs adult leadership and attention to the economy or we may well find ourselves in a much more dire National Security situation.